LB looks at pension reform options

LONG BEACH — All but one pension reform option presented to the Long Beach City Council on Tuesday would require action by state legislators, underscoring the burden this city and others are facing with rising retirement costs.

That option — in which employees pick up their full employee contribution — would save the city 21 percent on its pension expenses over 20 years, according to Director of Financial Management John Gross.

The average yearly savings to the general fund would be $5.9 million, he said.

Public safety unions in Long Beach have already agreed to pay their full employee contribution and institute a lower benefits tier for new employees in landmark reforms negotiated last year that officials say will save $100 million by 2022.

Miscellaneous employees, who make up the bulk of the city's workforce, have yet to make the same concessions, but discussions are continuing.

Mayor Bob Foster urged city leaders to focus on reforms that can be accomplished under current law rather than rely on Sacramento lawmakers, who remain divided on how to change the pension system to save money.

"There is self-help here," said Foster.

Other more ambitious changes offered to the council that require state action include:

Equal sharing between the city and employees of total pension costs, including covering investment losses and unfunded liabilities, to save $822 million over 20 years. The option would reduce pension costs by 46.5 percent;

Sharing standard annual pension contribution costs, with the city paying unfunded liabilities and other commitments, to save $453 million over 20 years. The option saves 25.6 percent of retirement contribution costs;

Paying new employees lowered pension benefits and increasing the retirement age to 65 to save $110million, or 6.2 percent of costs, in 20 years.

The reform options were requested in April and follow last week's announcement that the California Public Employees' Retirement System had gained 1 percent on its investments in the past 12 months.

The gain was far below CalPERS' assumed rate of return, which was 7.75 percent before being lowered to 7.5 percent in March.

CalPERS' trouble hits Long Beach more than most cities since it is the system's largest city.

"There is no doubt whatsoever that the payments we are making this year and are projected to make next year understate the payments we need to make to get rid of our unfunded liability," Gross said.

Long Beach has reduced its spending by $209 million since 2004 and eliminated 811 positions, yet still has a three-year deficit now estimated at $34.5 million.

With the city facing $202million in unfunded pension liabilities, Councilman James Johnson said officials and residents will have to think about what kind of city they want to have, going forward, and make difficult decisions.

"We've tried to cut our way out of this problem for 10 years," Johnson said. "From my perspective, the time has come to not just address the symptoms of the problem, but to address the core of the problem."